Chesapeake drops fight to extend 200 NY gas leases

Published: September 9, 2013 4:28 PM

ALBANY, N.Y. (AP) -- Chesapeake Energy has dropped its two-year legal battle to force an extension of 200 expired gas-drilling leases covering 13,000 acres in southern New York, the law firm representing the landowners said Monday.

Oklahoma City-based Chesapeake had argued that it had the right to extend the leases beyond the five-year expiration date because the state's moratorium on horizontal drilling and high-volume hydraulic fracturing has prevented it from drilling since 2008. U.S. District Court Judge David Hurd ruled in the landowners' favor in November, but Chesapeake had appealed.

Chesapeake's agreement to release the leases preserves the precedent set when Hurd ruled that the state's moratorium wasn't grounds to force an extension because it only precludes one type of drilling -- using advanced technology of horizontal drilling and high-volume hydraulic fracturing to access gas trapped in shale deposits, Cindy Manchester, lawyer for the landowners in Broome and Tioga counties along the Pennsylvania border, said Monday.

Chesapeake's action allows the landowners to seek better lease deals with other energy companies, or to keep drilling off their land. The leases were signed at $2-$3 an acre and 12.5 percent royalties before the shale gas boom took off in 2007 across the border in Pennsylvania and boosted land prices to thousands of dollars an acre with royalties of up to 20 percent on production.

Members of landowner coalitions in southern New York have grown increasingly frustrated as Gov. Andrew Cuomo has continued the moratorium on the technology that has brought areas in other states new jobs and economic growth and flooded the market with low-cost natural gas. Cuomo has said the state's health and environmental agencies are still working to determine if the gas well technology commonly referred to as fracking can be done without harming human health or the environment.

New York sits atop the gas-rich Marcellus Shale, which also runs underneath parts of Pennsylvania, Ohio and West Virginia.